Will Bitcoin Be Money?
Will bitcoin be money is such a strange question to ask in a crypto community. However, it is truly an important question to look into.
The biggest problem is that we do not know what money is. We, alive today, haven't seen it. (If you were alive in 1964 and could hold coins, then you have seen one form of money) We are so backwards in our thinking that we believe that gold was a money for thousands of years.
If we don't know what money is, or what it looked like, how can we answer the question, "Is bitcoin money"?
Actually making money
One of the things we take for granted with debt based fiat currency is that we can put it in the bank and get interest on it.
However, really think about it. Where does that money come from?
"Rich" people talk about having their money work for them. But, what does that mean?
The way you make money is to start a business where you make a good and sell it, resell it, or provide a service someone wants to pay for.
Now, to make money off of that, you either be the person starting the business, or you lend that person money to start up the business, or in some way, own a piece of that business, and regularly get part of its profits. And really, you are betting on the growth of that business.
So, to get interest on that savings account, the bank has to invest into businesses, that keep growing. That is the way to make money.
Actually making money Lending money into existence
Of course, the banksters don't really do that. What they supposedly do is "borrow" your money, and then lend it to someone else, and pay you a percentage of their take.
However, that doesn't work either. You can't live on that tiny percentage margin AND deal with any defaults. Home loans would have to be 20% interest, and savings accounts 5%. And this margin would only work for good, solid borrowers.
What actually happens, and where your savings account interest comes from is inflation.
The banks are able to lend money based on fractional reserve lending. The ability for the bank to pay the savings account holder is by making money up out of thin air.
All of what we consider normal is because of money inflation. Meaning, when we have a non-inflationary money, all of this stops. Right now, it is sorta working because the value of bitcoin is going up so rapidly.
But, imagine a world where when someone wanted to borrow money for a house, there would have to be enough people, with enough money saved for that person to be able to get a loan.
Lets say that ten people had saved 1/10th the value of a house. (do you have $100,000 in a savings account now?) These are 10 people, who today, all have a loan on their house. So, where comes all that money to be lent? The answer is, it doesn't. In the future, if bitcoin becomes the money, everyone can't have a mortgage.
When bitcoin is king, "savings accounts" will just be pools of available bitcoin to lend.
And then, we will learn quickly that we cannot charge interest on loans. Usury is a sin. And the reasons why is that the interest to pay back the loan doesn't exist. It only exists because of inflation. It only exists because the national debt keeps going up.
With hard money, you cannot charge interest. Unless, you want a system where the slowest person loses everything. Bankruptcy happens because there isn't enough money. No money is created to pay the interest. So, everyone is borrowing/stealing from everyone else, and the bottom person gets cleaned out.
Are we ready for that kind of change in our money system?
What we expect from money
The list of what makes a good currency (currency is like money, but without the 'store of value' property:
- Medium of exchange
- Unit of account
- Durable
- Divisible
- Portable
- Fungible
These attributes are very important to the users of the currency. And, our paper notes are good enough for now.
However, in the future, there will be attributes that will be even more important, and we won't settle, will not have to settle, for less:
- Store of value
- proof of money sent
- Sendable anywhere in the world
- Continuously divisible
- anti-hording technology
- inherently not stealable
- Inheritable
- auditable
All of this can take up many blog posts to discuss, however, what is not discussable is that we will demand this from our money. Sorry gold, you are not a future money.
Bitcoin doesn't even match this complete list, yet.
And there are attributes that aren't listed because i don't have words to label them yet.
It will be interesting to watch what money we adopt in the future.
It is looking like bitcoin is becoming more and more a store of value only. It is the most scarce, most provable, commodity we have. And, in that, may be the collateral used in the new finance industry/paradigm. So, it is like storing gold in vaults was a couple hundred years ago.
However, the way bitcoin is being hoarded by many whales is showing that it is not money. It is not really being spent. But that doesn't mean that it won't be spent / exchanged in the future, or that it will become the back bone of the digital currency that we use.
Maybe having a store of value is what is important in order to start a new monetary system.
Bitcoin was "supposed to be" digital money, however, if it is the digital money in the future, we will be arguing over satoshis, not bitcoin. We are almost at the point where acquiring a full bitcoin is near impossible. Satoshis and fractions of satoshis will be what things are priced in.
Strange things will be the norm in the future.